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Wednesday, May 8, 2013

Energy's Ripple Effects

We have a chance to become energy independent, something most of us never expected to see in our lifetimes. What it means exactly is still largely unknown, although its implications are overwhelmingly positive.

And all that has to happen for this wonderful realization to occur is for government officials to adopt the principle of "First, do no harm" with respect to energy, which is hardly a sure thing when it comes to the actions of our self interested politicians.

But putting aside their selfish non-public interest oriented maneuvers for the moment, let's look at just what energy is doing for the prosperity of the Bakken area in and around North Dakota.

"Places hundreds of miles away from the core of the Bakken oil boom benefit from rising wages and falling unemployment rates, the Federal Reserve Bank of Minneapolis said in a recent study.A “Bakken effect” showed on unemployment rates in counties more than 100 miles away from the oil producing area. An effect on wage growth was seen until 100 miles away.

The oil boom in the shale formation, which sits mostly in North Dakota, has led to strong growth in employment and record low unemployment in its core area, but researchers at the Minneapolis Fed wanted to measure the boom’s reach.

So, with the 12 Bakken oil counties as the pebble, they looked at the ripple effect — they compared county-level wage growth and unemployment rates to a county’s distance from the Bakken’s core.The immediate Bakken area benefited the most, showing the strongest wage growth and lowest unemployment, the Minneapolis Fed said.

Average weekly wages there have increased 140% since 2001, and unemployment has fallen to less than 2%.

Counties within 100 miles of the Bakken had the next largest increase in wages and the next lowest unemployment. At distances beyond 100 miles, the unemployment effect continued, but wage growth showed no additional Bakken effect — counties 100 to 200 miles away had lower wage growth than those within 100 miles from the Bakken, but about the same wage growth as counties 200 to 300 miles away and beyond, the Minneapolis Fed said.

The ripple effect in wages has been recent, however. Wage increases in counties up to 100 miles away from the Bakken started to pull ahead in 2009. In the core Bakken area, wages began to accelerate in 2005, at the start of the oil boom.

As distance increases, other factors likely explain wage gains or unemployment rates relative to distance from the Bakken, the Minneapolis Fed said. “Nevertheless, the negative correlation between wage growth and distance from the Bakken, as well as the positive correlation between unemployment and distance from the Bakken, has been growing stronger over time,” they said."

Summing UpEven an amateur non-numbers oriented guy like me gets the direct and absolute connection between energy, jobs and economic growth. Why can't the government knows best gang accept the blindingly obvious facts as well?Of course, I'm not willing to sit by and thereby do harm to our nation's economy, its citizens' prosperity or our financial mess.Sadly, it appears that many of the greenies and their allies in government don't feel the same way. They're apparently not in any hurry to "save the middle class."Politics sucks.Thanks. Bob.